The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
First American Financial (FAF) is a stock many investors are watching right now. FAF is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 10.29, while its industry has an average P/E of 30.24. Over the last 12 months, FAF's Forward P/E has been as high as 12.45 and as low as 8.57, with a median of 10.78.
We should also highlight that FAF has a P/B ratio of 1.29. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.38. Within the past 52 weeks, FAF's P/B has been as high as 1.54 and as low as 1.16, with a median of 1.42.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. FAF has a P/S ratio of 0.81. This compares to its industry's average P/S of 1.05.
Finally, we should also recognize that FAF has a P/CF ratio of 5.24. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. FAF's P/CF compares to its industry's average P/CF of 5.76. FAF's P/CF has been as high as 7.42 and as low as 5.11, with a median of 6.22, all within the past year.
Investors could also keep in mind Selective Insurance Group (SIGI), an Insurance - Property and Casualty stock with a Zacks Rank of # 2 (Buy) and Value grade of A.
Shares of Selective Insurance Group are currently trading at a forward earnings multiple of 13.14 and a PEG ratio of 1.23 compared to its industry's P/E and PEG ratios of 30.24 and 3.43, respectively.
SIGI's Forward P/E has been as high as 16.92 and as low as 12.59, with a median of 14.46. During the same time period, its PEG ratio has been as high as 1.64, as low as 0.94, with a median of 1.15.
Furthermore, Selective Insurance Group holds a P/B ratio of 1.65 and its industry's price-to-book ratio is 1.38. SIGI's P/B has been as high as 1.91, as low as 1.56, with a median of 1.77 over the past 12 months.
Value investors will likely look at more than just these metrics, but the above data helps show that First American Financial and Selective Insurance Group are likely undervalued currently. And when considering the strength of its earnings outlook, FAF and SIGI sticks out as one of the market's strongest value stocks.
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First American Financial Corporation (FAF) : Free Stock Analysis Report
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